When To Enter The Market: Commercial Hard Money Lender

To be successful investor/ commercial hard money lender in the commercial real estate market you have to be able to identify the different phases in the real estate cycle and be able to answer three question: when do I buy? When do I buy? When do I sell? When do I bottom-fish? The real estate cycle is a tool that when used correctly can provide investors with the substantial returns they look for in the market. Depending on how you answer those three questions will determine whether you are successful or not.

When is the best time to buy?: While there is no one size fits all answer to this question, smart investors know that typically the best time to buy is at the bottom or in the middle of the expansion cycle. Your buying trends will likely be in line with other investors as vacancies are decreasing, incomes are rising, and employment improves.

When is the best time to sell?: The answer to this is as the peak of the expansion phase. Here, property values are at their highest, but identifying where the peak is the highest is difficult (if not impossible). Two clues in identifying this peak is by watching rents and vacancy rates separately. After rents level off and become flat for three straight months or more, you’ve reached the top. Or for another indication you’ve reached the top: After vacancy rates are at a three- to five-year low, you’ve reached the top.

When is the best time to bottom-fish?: “Bottom-fishing” refers to buying practices where investors purchase property at the bottom of the market or at the front end of the recovery phase. While this is inherently risky, this is where the highest gains are made. Usually, the purchase is made in a depressed area with hopes that the property will rebound and values will rise.

Contact the specialists today at HML Investments for further information or to speak to a commercial hard money lender.